AUD/JPY closed above weekly 200-MA for the first time in 2-years

AUD/JPY closed above the weekly 200-MA last week for the first time since August 2015. Currently, the currency pair is trading at 88.94 levels; up 0.27% on the day.

Rally backed by widening yield spread

On a year-to-date basis, the cross is up 4.26%. The rally is backed by the yield differential, i.e. the spread or the difference between the Australia 10-year bond yield and the Japanese 10-year bond yield currently stands at 275 basis points [bps]; the highest since March 20.

Focus on RBA minutes

Investors will look to the Reserve Bank this week when it publishes minutes from its September board meeting on Tuesday. Markets are expecting the central bank to take note of the strong labor market and express concerns regarding the strong Aussie dollar. Later in the week, the AUD traders would look to speeches from Governor Philip Lowe and Assistant Governor Luci Ellis.

Meanwhile, the Japanese Yen is likely to continue tracking the action in the treasury yields.

AUD/JPY Technical Levels

A break above the psychological level of 89.00 would expose 89.42 [July high]. A violation there could yield 90.00 [zero levels]. On the other hand, a breakdown of support at 88.43 [weekly 200-MA] could yield a sell-off  to 87.86 [10-DMA] and 87.52 [50-DMA].